Working poor. Vulnerable employment. Decent Work Agenda. Guide to the new Millennium Development Goals Employment Indicators. Labour productivity

Transcription

1 Guide to the new Millennium Development Goals Employment Indicators including the full set of Decent Work Indicators Vulnerable employment Decent Work Agenda Labour productivity Working poor

2 Guide to the new Millennium Development Goals Employment Indicators including the full set of Decent Work Indicators International Labour Office Employment Sector Geneva, June 2009

3 Copyright International Labour Organization 2009 First published 2009 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, or by pubdroit@ilo.org. The International Labour Office welcomes such applications. Libraries, institutions and other users registered with reproduction rights organizations may make copies in accordance with the licences issued to them for this purpose. Visit to find the reproduction rights organization in your country. ILO Cataloguing in Publication Data Guide to the new Millennium Development Goals Employment Indicators: including the full set of Decent Work Indicators / International Labour Office. Geneva: ILO, p. ISBN: ; (web pdf); (CD ROM) International Labour Office Guide / employment / decent work / labour force participation / employment status / equal employment opportunity / woman worker / low income / labour productivity / poverty alleviation / measurement / definition Also available in French: Guide sur les nouveaux Indicateurs d Emploi des Objectifs du Millénaire pour le Développement: y compris l ensemble complet des Indicateurs du Travail Décent (ISBN ), Geneva, 2009, in Spanish: Guía sobre los nuevos Indicadores de Empleo de los Objetivos de Desarrollo del Milenio: incluido el conjunto completo de Indicadores de Trabajo Decente (ISBN ), Ginebra, 2009, in Portuguese: Guia sobre os novos Indicadores de Emprego dos Objectivos de Desenvolvimento do Milénio: inclui o conjunto completo dos Indicadores de Trabalho Decente (ISBN ), Genebra, ILO Cataloguing in Publication Data The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO publications and electronic products can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free of charge from the above address, or by pubvente@ilo.org Visit our website: Photocomposed and printed in Switzerland WEI / GEN

4 Preface running head The primary goal of the International Labour Organization (ILO) is to contribute, with member States, to achieve full and productive employment and decent work for all, including for women and young people, a goal embedded in the ILO 2008 Declaration on Social Justice for a Fair Globalization,1 and which has now been widely adopted by the international community. In order to support member States and the social partners to reach the goal, the ILO pursues a Decent Work Agenda (DWA) which comprises four interrelated areas: respect for fundamental workers rights and international labour standards, employment promotion, social protection and social dialogue. Explanations of this integrated approach and related challenges are contained in a number of key documents and tools which elaborate the concept of decent work and its mainstreaming,2 as well as in the Employment Policy Convention, 1964 (No. 122), and in the Global Employment Agenda (GEA). The Global Employment Agenda adoption in 2003 constitutes the basic policy framework through which the ILO pursues the objective of placing employment at the centre of economic and social policies.3 As the lead United Nations (UN) agency promoting productive employment and decent work, the ILO has an important responsibility for ensuring that the new Millennium Development Goals (MDGs) employment indicators are well understood and utilised by countries. This Guide contributes to delivering on this responsibility. This Guide to the New Millennium Development Goals Employment Indicators has been produced as a tool for country level use. It provides definitions, concepts and formulas for each of the new employment indicators, and is part of ILO s wider support to strengthening national level labour market information and analysis to inform policy making. Your views on its usefulness and applicability are most welcomed. José Manuel Salazar-Xirinachs Executive Director Employment Sector ILO Geneva Notes 1. See download/dg_announce_en.pdf 2. See the successive Reports of the Director-General to the International Labour Conference: Decent work (1999); Reducing the decent work deficit: A global challenge (2001); Working out of poverty (2003). See also the Toolkit for Mainstreaming Employment and Decent Work, Country Level Application, United Nations System Chief Executives Board for Coordination, ILO, bureau/pardev/download/toolkit_country_en.pdf 3. See And in particular: Implementing the Global Employment Agenda: Employment strategies in support of decent work, Vision document, ILO,

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6 Acknowledgements running head This Guide is the result of a collaborative effort within the International Labour Organization, and most especially among units within the Employment Sector. Specifically it benefitted from technical inputs from the Country Employment Policy, under the direction of Alana Albee and the Employment Trends Unit under the direction of Lawrence Jeff Johnson. The publication would not have been possible without substantial contributions from Theo Sparreboom, Sara Elder, Dorothea Schmidt and Eléonore D Achon. The Guide also benefited greatly from comments and suggestions made by Laura Brewer in the Skills Department. Supplementary information was provided by the ILO s Policy Integration and Statistics Department including the full set of Decent Work Indicators and technical information on the share of women in wage employment in the non-agricultural sector. Finally, we wish to thank those who supported the publication of the Guide into four languages, and its dissemination. They include Miranda Kwong, Roland Müller, Julia Lee, Francisco Dos Santos Guerreiro, Joel Cathenod, Maria Rodrigo Stinus and Stéphanie Garde. 5

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8 Contents running head Preface Acknowledgements List of abbreviations PART A 1. Background MDG 1B target and indicators Strengthening monitoring of labour markets Background to the information sheets PART B 1. Information sheets for employment indicators Country example: Pakistan Decent Work Indicators (full proposed set) Useful contacts

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10 List of abbreviations running head CPI DWA DWI FBS GDP GEA GET GGDC Consumer Price Index Decent Work Agenda Decent Work Indicator Federal Bureau of Statistics Gross Domestic Product Global Employment Agenda Global Employment Trends Groningen Growth and Development Centre HIV/AIDS Human Immuno-deficiency Virus / Acquired Immune Deficiency Syndrome HIPC Highly Indebted Poor Country IAEG Inter-Agency and Expert Group ICLS International Conference of Labour Statisticians ICSE International Classification by Status in Employment ILO International Labour Organization ISCO International Standard Classification of Occupations ISIC International Standard Industrial Classification of all Economic Activities KILM Key Indicators of the Labour Market LABORSTA International Labour Office Database on Labour Statistics LMIAS Labour Market Information and Analysis System MDG Millennium Development Goals MICS Multiple Indicator Cluster Survey OECD Organisation for Economic Co-operation and Development PPP Purchasing Power Parity TCB The Conference Board UN United Nations UNDESA United Nations Department of Economic and Social Affairs UNSNA United Nations System of National Accounts 9

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12 Part A 1. Background running head In 2000, the largest-ever gathering of world leaders ushered in the new millennium by adopting the Millennium Declaration, endorsed by 189 countries. It was then translated into a roadmap setting out goals to be reached by The eight Millennium Development Goals, see box below, build on agreements made by all countries at the United Nations in the 1990s to reduce poverty and hunger, and to tackle ill-health, gender inequality, lack of education, lack of access to clean water and environmental degradation. The MDGs are a compact, which recognizes the efforts that must be undertaken by developing countries, the contribution that developed countries can make as well as the importance of all countries working in partnership for the betterment of all, in particular the most vulnerable. In February 2007, the Secretary-General of the United Nations began a two-year devoted effort in the Commission for Social Development to actions which promote full employment and decent work for all. 1 Resolutions adopted guided the work of the Inter- Agency and Expert Group (IAEG) in their efforts to Millennium Development Goals 1. Eradicate extreme poverty and hunger 2. Achieve universal primary education 3. Promote gender equality and empower women 4. Reduce child mortality 5. Improve maternal health 6. Combat HIV/AIDS, malaria and other diseases 7. Ensure environmental sustainability 8. Develop a global partnership for development expand the MDGs to include a new target for employment and four new employment indicators. The indicators (detailed in this Guide) call on all countries to report progress and provide disaggregate data by sex and urban/rural as far as possible. The aim of this Guide is to inform national and international stakeholders on the definitions, concepts, calculations and data sources for each of the new employment indicators introduced in 2008 under the MDGs (see next page). It also reinforces the existing indicator on gender equality in the labour market under Goal 3. The purpose is to assist countries to monitor and report effectively on their employment situation. It should be recognized that the four new employment indicators are an important contribution to monitoring the Decent Work Agenda, as recommended by the 2008 ILO Declaration on Social Justice for a Fair Globalization.2 They should be seen in the context of the fuller set of proposed Decent Work Indicators (DWIs) that cover the four strategic objectives of the Decent Work Agenda namely employment; social protection; social dialogue and tripartism; and fundamental principles and rights at work (see Part B.3). This Guide is a supplement to the 2003 Indicators for Monitoring the Millennium Development Goals: definitions, rationale, concepts and sources. The basic information needed to monitor progress on each indicator is explained. For the complete MDG database please refer to Notes 1. See 2. See paragraph II.B.ii of the 2008 ILO Declaration on Social Justice for a Fair Globalization, english/bureau/dgo/download/dg_announce_en.pdf 11

13 Part guide to the new A Millennium 2. Development MDG Goals Employment 1B Indicators target and indicators 12 Recognizing that decent and productive work for all is central to addressing poverty and hunger, MDG 1 includes a new target and indicators (agreed upon in 2008): New MDG Target (1B) Achieve full and productive employment and decent work for all, including women and young people This target contains four indicators specifically and directly relating to employment issues. This Guide focuses on these four new employment indicators: New Employment Indicators: Growth rate of labour productivity (GDP per person employed) Employment-to-population ratio Proportion of employed people living below the poverty line Proportion of own-account and contributing family workers in total employment (vulnerable employment rate) These employment indicators are designed to: Provide relevant and robust measures of progress towards the new target of the Millennium Development Goals Be clear and straightforward to interpret and provide a basis for international comparison Be relevant and link to national-level country monitoring systems Be based on ILO international standards, recommendations and best practice in labour statistics, information and analysis Be constructed from well-established data sources which enable consistent measurement over time

14 Part A 3. Strengthening monitoring of labour markets running head The need to monitor employment trends internationally and at country level is not new, but it is more urgent than ever given the impact of economic crises that began in late The slowdown in economic growth in both developed and developing countries is cutting into government revenues and their abilities to invest in infrastructure, health and education. As economies slow, job losses and vulnerable employment increases and productivity declines. ILO s projections show dramatic increases in unemployment, working poverty and vulnerable employment.1 There is an urgent need, therefore, to have accurate and detailed data and information regularly produced on employment, especially among the poorest segments of the population. Reliable statistics, information and analyses are required in order to develop and monitor policies. This not only concerns strong national statistical offices, but also requires collaboration between statistical agencies, ministries of governments and social partners. The economic crisis is just one of the reasons for strengthening labour market information. There is need in most countries to strengthen employment information which can inform national development plans and priorities. By establishing a set of indicators on the labour market and monitoring them regularly, evidence-based policy decision making can be strengthened. Note 1. Global Employment Trends (Geneva, ILO, January 2009, 13

15 Part guide to the new A Millennium 4. Development Background Goals Employment Indicators to the information sheets 14 The information sheets in Part B.1 (see next pages) provide practical guidance on data collection and analysis of each of the four employment indicators under MDG 1. In addition, an information sheet is included on the employment indicator under MDG 3 (Gender Equality). For each indicator, the following information is included: The link between the indicator and the MDG goal and target Description and method of computation Definitions Sources and data collection Rationale for use of the indicator Comments and limitations Links to global and regional monitoring A practical example of the type of national analysis that can be produced based on the four MDG 1B indicators is provided in Part B.2. The MDG employment indicators should be understood as a sub-set of the fuller set of Decent Work Indicators proposed by the ILO, given in Part B.3. The full set of indicators is useful for countries which are considering establishing a Labour Market Information and Analysis System (LMIAS). Finally, Part B.4 includes contacts which may be useful for additional information.

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17 Part guide to the new B Millennium 1. Development Information Goals Employment Indicators sheets for employment indicators 16 Indicator 1.4 Growth rate of labour productivity (GDP per person employed) Goal and target addressed MDG Goal 1: Eradicate extreme poverty & hunger MDG Target 1B: Achieve full and productive employment and decent work for all, including women and young people Indicator: description and method of computation The labour productivity growth rate is measured as the annual change in Gross Domestic Product (GDP) per person employed. Labour productivity = GDP (measured at constant market prices in national currency) total employment labour productivity year N labour productivity year N 1 Labour productivity 100 growth rate labour productivity year N 1 Definitions Labour productivity represents the amount of output achieved per unit of labour input. For this purpose, output is measured as the national gross domestic product or GDP, a measure found in the national accounts of a country which represents the total value of national production minus the value of intermediate inputs such as raw materials, semi-finished products, services purchased and energy inputs. GDP for the aggregate economy is usually expressed at market prices, which reflect the market value of the output produced. Labour input is measured as the number of persons employed, or total employment. Employment refers to people above a certain age who worked or held a job during a specified reference period (as defined in the Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13th International Conference of Labour Statisticians (ICLS), October 1982). Included are: persons who worked for pay or profit (or pay in kind), persons who were temporarily absent from a job for such reasons as illness, maternity or parental leave, holiday, training or industrial dispute, and unpaid family workers who work for at least one hour. The measure is intended to capture both persons working in the formal and informal sectors.

18 Part B 1. Information sheets for employment indicators Sources and data collection Output measures are obtained from national accounts and represent, as much as possible, GDP at market prices for the aggregate economy. Guidelines for measurement of GDP are outlined in the United Nations System of National Accounts (UNSNA), See website: unstats.un.org/unsd/nationalaccount/default.htm. Employment data could be obtained from population censuses, labour force or other household surveys, establishment surveys, administrative records and official estimates based on results from several of these sources. Labour force surveys can be designed to cover virtually the entire population of a country, all branches of economic activity, all sectors of the economy, and all categories of workers, including own-account workers, unpaid family workers and persons engaged in casual work or marginal economic activity. For this reason, household-based labour force surveys offer a unique advantage for obtaining information on the labour market of a country and its structure. [See section in employmentto-population ratio, indicator 1.5 for more information.] Disaggregation. For the purpose of this indicator, no disaggregation (for example, of specific economic sectors) is desired. 17 Rationale Labour productivity can be used to assess the likelihood of the country s economic environment to create and sustain decent employment opportunities with fair equitable remuneration. Growth in labour productivity can occur in a number of ways. There may be an increased efficiency in the use of labour, without using any more of the other inputs. Alternatively, the growth may be due to an increased use of other inputs such as physical or human capital or intermediate inputs. A third way in which growth in the total economy can occur is as a result of a shift in the mix of activities in the economy. For instance, an industry might have shifted from activities with low levels of productivity to activities with higher levels, even if none of the activities has become more productive. There is empirical evidence that the link between productivity growth and poverty reduction is highest when productivity growth and employment growth go hand in hand. Consequently, measuring both growth in employment (see employment-to-population ratio, indicator 1.5) and productivity is needed to assess whether the development process is heading in the right direction. In addition, productivity increases often influence the social and economic environment positively, in turn leading to poverty reduction through investment, sectoral shifts, trade, technological progress and increases in social protection. Increases in productivity do not guarantee improvements in these areas, but it is certain that without productivity growth, improvements in conditions of work are less likely to occur. With limited increases in productivity, an economy generally sees little increase in the wages of workers and there is no additional potential to create new jobs. It is important that productivity growth is accompanied by improvements in the education and training systems so that the future workforce is better prepared to perform the jobs needed.

19 guide to the new Millennium Development Goals Employment Indicators 18 Comments and limitations For developing countries, value added in basic prices, which is a relatively new concept introduced in the latest revision of the United Nations System of National Accounts (1993) might not be available. Rather, an alternative valuation that expresses value added at factor costs may be used. The factor cost concept represents the overall gross income from operating activities. These differences in valuation concepts do affect the consistency of the levels of output in national currency when compared across countries. But the valuation concept has little impact on comparisons of growth rates of productivity as the percentage differences between output at various valuation concepts do not change much over time. Despite the common principles based on the United Nations System of National Accounts, there are still significant problems in international consistency of national accounts estimates, in particular for economies outside the Organization for Economic Co-operation and Development (OECD). One example of inconsistency arises from the different degree of coverage of informal economic activities in developing economies and of the underground economy in developed economies in national accounts. Some economies use data from special surveys for unregistered activities, or indirect estimates from population censuses or other sources to estimate these activities, and large differences in coverage between economies remain. In addition to such inconsistencies there are significant differences in scope and quality of the primary national statistics and the staff resources available for the preparation of the relevant national estimates. For more information on limitations to comparability, see chapter 7 of ILO, Key Indicators of the Labour Market, 5th Edition (Geneva, 2007); Data for global and regional monitoring Data for global and regional monitoring for this indicator is reported by the International Labour Organization, Employment Trends Unit, Geneva, Switzerland. Rather than collect national estimates on labour productivity, the ILO utilizes a secondary source for the estimates. The estimates for the aggregate economy are derived from the Total Economy Database of the Conference Board (TCB) and the Groningen Growth and Development Centre (GGDC) at the University of Groningen, the Netherlands. TCB and GGDC have long-standing expertise in developing and analysing data on productivity performance. A full documentation of sources and methods by country and underlying documentation on the use of Purchasing Power Parity (PPP) can be downloaded from the website of the Conference Board at: database.cfm. Sources of discrepancies between reported MDG indicators and national indicators. TCB and GGDC apply a complex methodology and a mix of data sources to produce the country-level estimates shown by the UN within the MDG indicators. To compare labour productivity levels across economies, it is necessary to convert gross value added to

20 Part B 1. Information sheets for employment indicators US dollars on the basis of adjusted purchasing power parity. A PPP represents the amount of a country s currency that is required to purchase a standard set of goods and services worth one US dollar. The total economy estimates of gross value added are expressed in terms of 1990 US dollars, as the 1990 PPP made it possible to compare the largest set of countries. Indicator 1.5 Employment-to-population ratio 19 Goal and target addressed MDG Goal 1: Eradicate extreme poverty & hunger MDG Target 1B: Achieve full and productive employment and decent work for all, including women and young people Indicator: description and method of computation The employment-to-population ratio is the proportion of a country s working-age population that is employed. The indicator is computed by dividing the total number of employed person above a certain age (typically 15 years and over) by the population of the same age group: Employment-to-population ratio (Total employment working-age population) 100 The indicator typically falls between 50 and 75 per cent with a higher share indicating that a greater proportion of the population that could be working does work. A low ratio indicates that a large share of the population is not involved directly in market-related activities. In many countries, the ratio is lower for females than for males. Definitions Employment refers to people above a certain age who worked or held a job during a specified reference period (as defined in the Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13th International Conference of Labour Statisticians, October 1982). Included are: persons who worked for pay or profit (or pay in kind), persons who were temporarily absent from a job for such reasons as illness, maternity or parental leave, holiday, training or industrial dispute, and unpaid family workers who work for at least one hour. The measure is intended to capture both persons working in the formal and informal sectors. For most countries, the working-age population is defined as persons aged 15 years and older, although this may vary slightly from country to country.

21 guide to the new Millennium Development Goals Employment Indicators 20 Sources and data collection Data could be obtained from population censuses, labour force or other household surveys, establishment surveys, administrative records and official estimates based on results from several of these sources. Both components (employment and population) should come from the same source. Labour force surveys can be designed to cover virtually the entire population of a country, all branches of economic activity, all sectors of the economy, and all categories of workers, including own-account workers, unpaid family workers and persons engaged in casual work or marginal economic activity. For this reason, household-based labour force surveys offer a unique advantage for obtaining information on the labour market of a country and its structure. Other sources such as population censuses, administrative records, etc. differ in scope, coverage, units of measurement and methods of data collections. Labour force and household surveys may have limited geographical and population coverage. Each source has advantages and limitations in terms of the cost, quality and type of information gained. The ideal geographic coverage is the entire country (no geographic exclusions) and entire populations (no exclusion of population groups). The ILO standard for the lower age limit is 15 years. For many countries, this age corresponds directly to societal standards for education and work eligibility. Some countries impose an upper limit for eligibility, such as 65 or 70 years, although if possible, all upper age groups should be included. Disaggregation. Ideally, the data should be disaggregated by sex and age group. Countries might also want to consider disaggregating according to urban/rural residence. Rationale The indicator provides information on the ability of an economy to provide employment. The ratio, both in its level and change over time, can be viewed in connection with economic growth to determine the extent to which economic growth is pro-employment growth and, in connection, pro-poor. Reviewing the indicator by sex (male v female) and age (youth v total) also provides a picture of the equality of employment opportunities across different population groups. Comments and limitations The employment-to-population ratio indicator measures quantity only. It says nothing to the quality of employment in which people work and this poses a dilemma in terms of prescribing a positive direction for the indicator trends over time. An increase in the indicator, meaning a larger share of the country s population has gained employment, has positive implications on poverty reduction only if the jobs gained are well-paid, productive and secure in other words, if the jobs gained are decent jobs. Reviewing this indicator along with other indicators for MDG target 1B will provide a broader picture of the direction and quality of employment growth.

22 Part B 1. Information sheets for employment indicators There is no optimal employment-to-population ratio. Developed economies tend to have lower ratios than developing economies because their higher productivity and incomes means that fewer workers are required to meet the needs of the entire population. Very high ratios, on the other hand, indicate that the majority of poor people are working out of the necessity to subsist regardless of the quality of work. The following summarizes some general rules relating to the indicator trends: Ratios should be lower for youth than for the overall population (15 years and over) as more young people (as a share of their age group) participate in education in comparison with adults. Unless the young person is working as a principal activity while studying, they will be counted as outside of the labour force (meaning they are not counted among the numerator youth employed but remain in the denominator youth population). Ratios for women may be lower than those for men as a result of women voluntarily staying at home and not participating in labour markets. However, if the difference is the result of involuntarily low labour force participation for women, efforts should be made to increase the ratios for females over time by promoting employment opportunities for women. Employment-to-population ratios should neither be too low nor too high. Ratios above 80 per cent, for instance, often occur in very poor countries and usually indicate an abundance of low quality jobs. Increases in employment-to-population ratios should be moderate as sharp increases could be the result of decreases in productivity. 21 Data for global and regional monitoring Data for global and regional monitoring for this indicator is reported by the International Labour Organization, Employment Trends Unit, Geneva, Switzerland. The majority of ILO data for the employment-to-population ratio reflect nationally-reported data collected by the ILO Bureau of Labour Statistics or other international organizations such as the OECD. The full dataset of available country-level employment-to-population ratios are reported in table 2b in the Key Indicators of the Labour Market (KILM) dataset ( However, because not all countries report data in every year and, indeed, some countries do not report data for any years at all, the ILO has developed an econometric model to estimate missing values and generate global and regional estimates. The Model-based country-level estimates (reported as KILM table 2a) are those that are passed on the UN for publishing as indicator 1.5. Sources of discrepancies between reported MDG indicators and national indicators. Because the country-level estimates shown by the UN within the MDG indicators are Model-driven estimates, produced in order that harmonized data can be provided for every country and every year, the indicator produced from sources at the national level might be

23 guide to the new Millennium Development Goals Employment Indicators 22 found to differ slightly. The reason for the discrepancy is most likely explained by the technique utilized in the Model, as described below. The ILO Global Employment Trends (GET) Model uses multivariate regression techniques to impute missing values at the country level. The first step in each model is to assemble every known piece of real information (i.e. every real data point) for each indicator in question. It is important to note that only data that are national in coverage and comparable across countries and over time are used as inputs. This is an important selection criterion when the models are run, because they are designed to use the relationship between the various labour market indicators and their macroeconomic correlates (such as per-capita GDP, GDP growth rates, demographic trends, country membership in the Highly Indebted Poor Country (HIPC) Initiative, geographic indicators and country and time dummy variables) in order to produce estimates of the labour market indicators where no data exist. Thus, the comparability of the labour market data that are used as inputs in the imputation models is essential to ensure that the models accurately capture the relationship between the labour market indicators and the macroeconomic variables. For further information on the world and regional econometric models, readers can consult the technical background papers available at the following website: wrest.htm. Indicator 1.6 Proportion of employed people living below the poverty line (working poverty rate) Goal and target addressed MDG Goal 1: Eradicate extreme poverty & hunger MDG Target 1B: Achieve full and productive employment and decent work for all, including women and young people Indicator: description and method of computation The working poor are defined as employed persons living in a household whose members are estimated to be below the nationally-defined poverty line. The number of working poor can be calculated using the equation: working poor = poverty rate labour force 15, where labour force 15 is the labour force aged 15 years and above.1 The key assumption behind using the labour force instead of employment numbers is that all, or nearly all, 1. The best method for calculating the number of working poor is on the basis of cross-tabulations from micro survey data sets that include variables on both poverty status and labour force characteristics. If these data are not available, which is often the case, the method described in the main text can be used.

24 Part B 1. Information sheets for employment indicators of the poor in the labour force are employed. This assumption is made because in countries where social safety nets do not exist, poor individuals must work in order to maintain a subsistence level. Note, 15 years and over is typically used to define the standard working-age population of a country. Some countries, however, apply other age limits. It is the nationally-defined working-age population which should be used here. The working poverty rate is the proportion of working poor in total employment: Working poverty rate = (number of employed persons living in a household with income below the poverty line total employment) Definitions Working poor and working poverty rate see definitions above. Labour force is the sum of the number of persons employed and the number of persons unemployed (as defined in the Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13th International Conference of Labour Statisticians, October 1982). For most countries, the working-age population is defined as persons aged 15 years and older, although this may vary slightly from country to country. Employment refers to people above a certain age who worked or held a job during a specified reference period (as defined in the Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13th International Conference of Labour Statisticians, October 1982). Included are: persons who worked for pay or profit (or pay in kind), persons who were temporarily absent from a job for such reasons as illness, maternity or parental leave, holiday, training or industrial dispute, and unpaid family workers who work for at least one hour. The measure is intended to capture both persons working in the formal and informal sectors. The poverty line is the minimum level of income deemed necessary to achieve an adequate standard of living in a given country. Sources and data collection To estimate the number and proportion of the working poor, it is first necessary to establish the poverty line. Different countries use different methods for doing this. In many countries information is obtained through surveys on personal consumption expenditure or, in a few cases, personal income. Personal consumption data is usually preferred, since it tends to be more reliable, and also because it tends to give a better reflection of the real current living standards of households. A level of personal consumption expenditure (or income) is then set below which the person or household is considered to be poor. This threshold level is set at the amount of net income (and therefore expenditure) necessary to buy a specified quantity of household goods. The labour market information (labour force and working age population and total employment) could be obtained from population

25 guide to the new Millennium Development Goals Employment Indicators 24 censuses, labour force or other household surveys, establishment surveys, administrative records and official estimates based on results from several of these sources. Labour force surveys can be designed to cover virtually the entire population of a country, all branches of economic activity, all sectors of the economy, and all categories of workers, including own-account workers, unpaid family workers and persons engaged in casual work or marginal economic activity. For this reason, household-based labour force surveys offer a unique advantage for obtaining information on the labour market of a country and its structure. (See section in employmentto-population ratio, indicator 1.5 for more information). Disaggregation. For the purpose of this indicator, no disaggregation (for example, by sex) is recommended. This is mainly because of the difficulties in producing disaggregated poverty rate information. However, if estimates are derived from micro survey datasets, disaggregation can be feasible (see footnote 1). Rationale Working poverty gives an indication of the lack of decent work: if a person s work does not provide an income high enough to lift them and their families out of poverty, then these jobs, at the very least, do not fulfil the income component of decent work and it is likely that other components are not being fulfilled either. Within the development process, the working poor share would decrease, which would in turn, further foster the development process. The working poor definition applies poverty data to the countries specific labour market characteristics, such as the size of the working-age population and the labour force participation rate. By combining these labour market factors with poverty data, working poverty estimates give a clearer picture of the relationship between poverty and employment than that provided by using standard poverty data alone. Comments and limitations Estimates of working poverty that are based on the equation working poor = poverty rate labour force are limited in that they are not direct measurements, but rather derived estimates from national data and are based on several simplifying assumptions that may not hold. Such estimates should be interpreted with care. Where the methodology used in the poverty surveys in a particular country changes over time, it is extremely difficult to make any useful comparisons over time. However, where the same poverty line is used consistently over time and the same survey methodology has been used for collecting the income and expenditure data, it should be possible to make valid comparisons over time. Even if these conditions are met, poverty rates may vary quite substantially from year to year because of economic or weather conditions. Natural disasters (such as the Asian tsunami) or financial crises (such as the 1997 financial crash in South East Asia) can have a major effect on poverty rates, at least in the short term.

26 Part B 1. Information sheets for employment indicators One other major problem is the way in which non-market production and consumption are valued. In some countries these may represent an important part of income and consumption, and decisions made about the value to be attached to these items will have an important effect on the poverty rates. Data for global and regional monitoring Data for global and regional monitoring for this indicator is reported by the International Labour Organization, Employment Trends Unit, Geneva, Switzerland. The ILO produces its own country-level estimates of the working poor using labour market input data (working-age population, labour force and employment) from econometric models that utilize available national data and apply multivariate regression techniques to impute missing values at the country level. The first step in each model is to assemble every known piece of real information (i.e. every real data point) for each indicator in question. It is important to note that only data that are national in coverage and comparable across countries and over time are used as inputs. This is an important selection criterion when the models are run, because they are designed to use the relationship between the various labour market indicators and their macroeconomic correlates (such as per-capita GDP, GDP growth rates, demographic trends, country membership in the HIPC Initiative, geographic indicators and country and time dummy variables) in order to produce estimates of the labour market indicators where no data exist. Thus, the comparability of the labour market data that are used as inputs in the imputation models is essential to ensure that the models accurately capture the relationship between the labour market indicators and the macroeconomic variables. For the ILO calculation of working poor, poverty data come from the World Bank, specifically the international poverty line at US$1.25 a day (reproduced as MDG indicator 1.1). The resulting measure of working poor, therefore, refers to employed persons who live with their families below the US$1.25/day poverty line. Sources of discrepancies between reported MDG indicators and national indicators. Because the country-level estimates shown by the UN within the MDG indicators are model-driven estimates, produced in order that harmonized data can be provided for every country and every year, the indicator produced from sources at the national level might be found to differ. 25

27 guide to the new Millennium Development Goals Employment Indicators Indicator 1.7 Proportion of own-account and contributing family workers in total employment (vulnerable employment rate) 26 Goal and target addressed Indicator: description and method of computation MDG Goal 1: Eradicate extreme poverty & hunger MDG Target 1B: Achieve full and productive employment and decent work for all, including women and young people The indicator is a measure of what are deemed to be the more vulnerable statuses of employment, namely own-account workers and contributing family workers. The vulnerable employment rate is calculated as the sum of ownaccount and contributing family workers as a proportion of total employment: Vulnerable employment rate [(number of own-account workers number of contributing family workers) total employment] 100 Definitions The indicator is based on the measure of status in employment, as defined according to the International Classification by Status in Employment (ICSE), approved by the United Nations Statistical Commission in 1958 and revised at the 15th International Conference of Labour Statisticians in The ICSE defines six status categorizes that are largely based on the type of economic risk associated with the job, an element of which is the strength of the attachment between the person and the job, and the type of authority over establishments and other workers which the job incumbents have or will have. The 1993 ICSE employment statuses are: (1) wage and salary workers, also known as employees; (2) self-employed workers with employees, also known as employers; (3) self-employed workers without employees, also known as own-account workers; (4) members of producers cooperatives; (5) contributing family workers, also known as unpaid family workers; and (6) workers not classifiable by status. For full definitions of all status groups, see the Resolution concerning the international classification of status in employment, adopted by the 15th International Conference of Labour Statisticians, Geneva, Website: resolutions/lang--en/docname--wcms_087562/index.htm. The 1993 ICSE defines own-account workers as: those workers who, working on their own account or with one or more partners, hold the type of jobs defined as a self-employment jobs (i.e. jobs where the remuneration is directly dependent upon the profits derived from the goods and services produced), and have not engaged on a continuous basis any employees to work for them.

28 Part B 1. Information sheets for employment indicators The 1993 ICSE defines contributing family workers as: those workers who hold self-employment jobs as own-account workers in a marketoriented establishment operated by a related person living in the same household. Employment refers to people above a certain age who worked or held a job during a specified reference period (as defined in the Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13th International Conference of Labour Statisticians, October 1982). Included are: persons who worked for pay or profit (or pay in kind), persons who were temporarily absent from a job for such reasons as illness, maternity or parental leave, holiday, training or industrial dispute, and unpaid family workers who work for at least one hour. The measure is intended to capture both persons working in the formal and informal sectors. 27 Sources and data collection Data could be obtained from population censuses, labour force or other household surveys, establishment surveys, administrative records and official estimates based on results from several of these sources. Labour force surveys can be designed to cover virtually the entire population of a country, all branches of economic activity, all sectors of the economy, and all categories of workers, including own-account workers, unpaid family workers and persons engaged in casual work or marginal economic activity. For this reason, household-based labour force surveys offer a unique advantage for obtaining information on the labour market of a country and its structure. [See section in employment-to-population ratio, indicator 1.5 for more information.] Disaggregation. Ideally, the data should be disaggregated by sex and age group. Countries might also want to consider disaggregating according to urban/rural residence. Rationale Vulnerable employment is a newly defined measure of persons who are employed under relatively precarious circumstances as indicated by the status in employment. Because contributing family workers and ownaccount workers are less likely to have formal work arrangements, access to benefits or social protection programmes and are more at risk to economic cycles, these are the statuses categorized as vulnerable. The indicator is highly gender sensitive since, historically, contributing family work is a status that is dominated by women. There is also a connection between vulnerable employment and poverty: if the proportion of vulnerable workers is sizeable, it may be an indication of widespread poverty. The connection arises because workers in the vulnerable statuses lack the social protection and safety nets to guard against times of low economic demand and often are incapable of generating sufficient savings for themselves and their families to offset these times.